by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
randolphp@umkc.edu

STATUTE OF FRAUDS; ESTOPPEL: Montana Supreme Court rules that promissory
estoppel is not available to enforce a contract that is void due to the
Statute of Frauds. Austin v. Cash, 906 P.2d 669 (Mont. 1995). Buyers
brought an action for specific performance of a contract to acquire certain
Montana land based upon revised counteroffer. The revised counteroffer in
this case was not "subscribed" to by the seller and therefore did not meet
the Statute of Frauds requirements. But one of the brokers testified that
the seller verbally had agreed to the counteroffer. The buyers alleged that
that broker had represented to the buyers that the seller had signed the
counteroffer, when in fact the broker had simply written new terms onto an
earlier counteroffer that seller's had signed and faxed it to the buyers.
The result was that there was at least an argument that the parties had
agreed verbally and that the buyers believed that seller had signed a
counteroffer.

Subsequently, the buyers, in negotiating over the sale of some property in
California that everyone knew had to be sold to make the instant deal work,
reduced the price of the California property by $45,000. Buyers claimed
that that they would not have reduced the price had they known that they did
not have a binding deal on the purchase of this new property. The trial
court found for the buyers, so one assumes that most issues of fact would be
construed in favor of the buyers. Nonetheless, the Montana Supreme Court
reversed.

The court held that the contract could not be taken out of the Statute of
Frauds under the theory of part performance by the buyers since the
reduction in price of the California property was done in contemplation of
eventual performance, but was not itself performance of the Montana
contract. Buyers' actions were not unequivocally referable to the Montana
contract. Promissory estoppel is not applicable, when there is a case
within the Statute of Frauds. Since the contract did not meet the Statute
of Frauds requirements, there was no valid contract in existence and the
court did not grant specific performance to the purchaser.

Comment: The facts given us by the Montana court do not indicate that the
sellers had any reason to expect that the buyers would reduce the price of
the California property on the basis of their belief that they had a deal in
Montana. Consequently, the fundamental requirement for estoppel based upon
forseeable reliance doesn't exist in this case. But to the extent that the
court is suggesting that estoppel would never be available in favor of
buyers as against a contract that is void for the Statute of Frauds, the
editor doubts that the court is following the generally accepted common law.
If a seller makes a verbal promise to sell, and the buyer relies upon that
promise in a foreseeable way, there is an estoppel. The consequence may be
simply that the buyer is entitled to some equitable relief for the
consequences of the reliance, and may not be entitled to get the contract
enforced. But certainly enforcement of the contract is one conceivable
remedy given the right circumstances.

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